By Liz Young and Denny Jacob

The world's largest owner of industrial real estate says companies are leasing more custom-built warehouse space despite broader economic uncertainty.

San Francisco-based Prologis on Wednesday said it logged more than $900 million in new development starts in the quarter ended June 30, up from $324 million in the same period a year earlier. About 65% of the new projects were leased to tenants before construction started.

Hamid Moghadam, the company's co-founder and chief executive, said companies are finding they need new space to grow into even as they face questions about consumer demand, inflation and changing trade policy.

"With every passing day, there's more water building up behind the dam, and we're seeing the evidence of this with the largest customers," Moghadam said on an investor call Wednesday. "Their ability to defer is getting reduced with every passing day."

Prologis increased its projected new development starts for the year to a range of $2.25 billion to $2.75 billion, from a previous estimate of $1.5 billion to $2 billion, driven by growing demand for build-to-suit space, which is leased in advance by a tenant.

Moghadam said build-to-suit leasing over the past three months has been "the strongest it's been in my career."

Retailers, consumer packaged-goods companies and automotive-parts manufacturers that have committed to new buildings are betting they will need the new space by the time the buildings wrap up construction, Moghadam told The Wall Street Journal.

Warehouse owners, operators and developers have grappled over the past three years with slow leasing activity as companies paused leasing decisions following a period of frenzied warehouse expansion during the pandemic.

The average warehouse vacancy rate across the U.S. ticked up to 7.1% in the second quarter from 6.1% a year earlier, the first time the vacancy rate surpassed 7% since 2014, according to commercial real-estate services firm Cushman & Wakefield.

Moghadam said Prologis is still seeing weak leasing activity for warehouses built speculatively, meaning without tenants lined up in advance.

He said there is strong demand for renewing existing warehouse leases as companies choose to "kick the can down the road and figure it out later."

The company has a portfolio of 1.3 billion square feet of industrial real estate in 20 countries and tenants such as Amazon.com, FedEx and Home Depot.

Prologis's revenue in the second quarter grew to $2.18 billion from $2.01 billion last year. Analysts polled by FactSet had expected $2.01 billion.

The company reported that earnings attributable to common stockholders in the second quarter fell to $571.2 million, or 61 cents a share, from $861.3 million, or 92 cents a share, the prior year. Stripping out certain one-time items, core funds from operations came in at $1.46 a share, above analyst expectations.

Prologis also revised its outlook for the year. The company guided for core funds from operations to be between $5.75 a share and $5.80 a share compared with a prior forecast in the range of $5.65 a share to $5.81 a share.

Write to Liz Young at liz.young@wsj.com and Denny Jacob at denny.jacob@wsj.com

(END) Dow Jones Newswires

July 16, 2025 17:24 ET (21:24 GMT)

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